Stock Quotes in this Article: CFX, D, HES, PCYC, SBUX

WINDERMERE, Fla. (Stockpickr) -- Corporate insiders sell their own companies’ stock for a number of reasons.

They might need the cash for a big personal purchase such as a new house or yacht, or they might need the cash to fund a charity. Sometimes they sell as part of a planned selling program that they have put in place for diversification purposes, which allows them to sell stock in stages instead of selling all at one price.

Other times they sell because they think their stock is overvalued and the risk/reward is no longer attractive. Some even dump their own stock because they have inside knowledge that a competitor is eating their lunch and stealing market share.

But insiders usually buy their own shares for one reason: They think the stock is a bargain and has tremendous upside.

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The key word in that last statement is “think.” Just because a corporate insider thinks his or her stock is going to trade higher, that doesn’t mean it will play out that way. Insiders can have all the conviction in the world that their stock is a buy, but if the market doesn’t agree with them, the stock could end up going nowhere. Also, I say “usually” because sometimes insiders are loaned money by the company to buy their own stock. Those loans are often sweetheart deals and shouldn’t be viewed as organic insider buying.

At the end of the day, its large institutional money managers running big mutual funds and hedge funds that drive stock prices, not insiders. That said, many of these savvy stock operators will follow insider buying activity when they agree with the insider that the stock is undervalued and has upside potential. This is why it’s so important to always be monitoring insider activity, but it’s twice as important to make sure the trend of the stock coincides with the insider buying.

Recently, a number of companies’ corporate insiders have bought large amounts of stock. These insiders are finding some value in the market, which warrants a closer look at these stocks. Here’s a look at some stocks where insiders have been doing some big buying in per SEC filings.

 

Starbucks

One stock whose insiders have done some notable buying is coffee king Starbucks (SBUX), a roaster, marketer and retailer of specialty coffee, operating in more than 50 countries. This stock is making the longs very happy in 2012, with shares up over 25% year-to-date.

Starbucks has a market cap of $35.8 billion and an enterprise value of $34.4 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 28.8 and a forward price-to-earnings of 21.2. Its estimated growth rate for this year is 21.7%, and for next year it’s pegged at 22.2%. This is a cash-rich company, since the total cash position on its balance sheet is $2.05 billion and its total debt is $500.90 million.

A director just bought 10,000 shares, or $476,800 worth of stock, at $47.68 per share.

From a technical standpoint, SBUX is currently trading above both its 50-day and 200-day moving averages, which is bullish. That said, the stock just ran into some stiff overhead resistance at around $48.60 right after the company reported earnings. It looks like SBUX wants to trend lower in the near-term, possibly back towards its 50-day moving average of $45.38 a share.

If you’re bullish on SBUX, I would look to buy some shares off of any weakness back towards the 50-day. This stock is still in a strong uptrend, but in the near-term the trend looks lower since that $48.60 level is acting as resistance. If you buy up SBUX near the 50-day, then simply use a mental stop just below that level in case SBUX needs to come in a bit more.

Starbucks is one of TheStreet Ratings' top-rated restaurant stocks.

Hess

Another stock that insiders are buying up shares of is Hess (HES), a global integrated energy company that operates in two segments: exploration and production (E&P) and marketing and refining (M&R). This stock has basically done nothing so far in 2012, with shares up just under 1%.

Hess has a market cap of $19.2 billion and an enterprise value of $24.8 billion. This stock trades at a cheap valuation, since its trailing price-to-earnings is 11.4 and its forward price-to-earnings is 7.08. Its estimated growth rate for this year is 12.1%, and for next year it’s pegged at 22.5%. This is far from a cash-rich company, with a total cash position on its balance sheet of $351 million and total debt of a whopping $6.06 billion

The CEO and chairman of the board just bought 91,250 shares, or around $5 million worth of stock, at $54.79 per share.

From a technical standpoint, HES is currently trading above its 50-day moving average and well below its 200-day moving average, which is neutral trendwise. This stock formed a double top a few months ago at around $66.37 to $66.19 a share. Since forming that top, the stock moved back into a trading range between $62 and $54 a share.

If you’re bullish on HES, then one could be a buyer once it closes back above its 50-day moving average of $57.35 on heavy volume. Look for volume that’s near or above its three-month average action of 3.9 million shares. At last check, HES is starting to move above the 50-day here but the volume so far is light, so watch how it finishes the day. If we get a sustained high-volume move and close back above the 50-day, then target a run towards $62 a share in the near future.

Hess, one of SAC Capital's top holdings as of the most recently reported period, shows up on a list of 5 Energy Stocks for 2012.

Dominion Resources

One stock in the electric utilities complex where insiders are snapping up is Dominion Resources (D), a producer and transporter of energy, with a portfolio of approximately 27,600 megawatts of generation, 11,000 miles of natural gas transmission, gathering and storage pipeline and 6,100 miles of electric transmission lines. Insiders are buying into weakness here since this stock is off by around 4.5% so far in 2012.

Dominion Resources has a market cap of $28.8 billion and an enterprise value of $48.2 billion. This stocks trades at a reasonable valuation, since its trailing price-to-earnings is 19.4 and its forward price-to-earnings is 14.6. Its estimated growth rate for this year is 6.2%, and for next year it’s pegged at 6.8%. This is far from a cash-rich company, with a total cash position on its balance sheet of $248 million and total debt of a whopping $19.76 billion.

The president and CEO just bought 5,000 shares, or about $247,492 worth of stock, at $49.50 per share. The CFO and two other directors also just bought 12,800 shares, or about $650,000 worth of stock, at $49.66 to $49.49 per share.

From a technical standpoint, D is currently trading above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock recently sold off hard from its December highs at around $53.50 to a recent low of $48.87. That low corresponded with the stock’s 200-day moving average of $48.77 a share. Once the 200-day was hit, the buyers stepped in and supported the stock.

If you‘re a bullish on D, I would look to get long once it trades back above its 50-day moving average of $50.96 a share with heavy volume. Look for volume that’s near or above its three-month average action of 2,745,180 shares. If we get a high-volume move back above the 50-day, then D has a good chance to trade back towards its 52-week high of $53.68 a share.

Dominion was also featured recently in "7 Dividend Stocks Handing Out More Cash in 2012."

Pharmacyclics

In the biotechnology and drugs complex, insiders are buying up shares of Pharmacyclics (PCYC), a clinical-stage biopharmaceutical company focused on developing and commercializing small-molecule drugs for the treatment of cancer and immune mediated diseases. Insiders are buying into extreme strength here since this stock is up over 26% in 2012.

Pharmacyclics has a market cap of $1.31 billion and an enterprise value of $1.18 billion. This stock trades at some rich valuations, with a price-to-sales of 203.62 and a price-to-book of 13.62. Its estimated growth rate for this year is -40.7%, and for next year it’s pegged at 7.2%.

This is a cash-rich company, since the total cash position on its balance sheet is $105.25 million and its total debt is zero.

A beneficial owner just bought 500,652 shares, or about $9 million worth of stock, at $17.86 to $17.89 per share. This same beneficial owner also just bought over $7.6 million worth of stock, at $15 to $16.64 per share.

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From a technical standpoint, PCYC is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been in a monster uptrend for the past six months, where the stock has been consistently making higher lows and higher highs. During that uptrend, the stock has dipped below its 50-day moving average just a few times, and it was bought up immediately each time.

If you’re bullish on PCYC, I would look to trade the next major breakout that will trigger once the stock moves above some near-term overhead resistance at $19.46 a share on heavy volume. Look for volume on the move that’s near or above its three-month average action of 837,027 shares. One could be a buyer of PCYC off any weakness and simply anticipate the breakout. I would use a mental stop just below some near-term support at $18 a share.

Colfax

A stock in the capital goods complex whose insiders are snapping up an enormous amount of stock in is Colfax (CFX), a global supplier of a range of fluid handling products, including pumps, fluid handling systems and controls and specialty valves. Insiders are buying into strength here since shares of CFX are up over 10% so far in 2012.

Colfax has a market cap of $1.38 billion and an enterprise value of $1.36 billion. This stock trades at a reasonable valuation, since its trailing price-to-earnings is 47.23 and its forward price-to-earnings is 18.81. Its estimated growth rate for this year is 48.9%, and for next year it’s pegged at 22.6%. This is not a cash-rich company, with a total cash position on its balance sheet of $64.5 million and total debt of 75 million.

Two beneficial owners just bought 4,340,000 shares, or $100 million worth of stock, at $23.04 per share. Both of these monster buys were part of a private placement of CFX stock.

From a technical standpoint, CFX is currently trading above both its 50-day and 200-day moving averages, which is bullish This stock has been uptrending strong since October, with the stock making mostly higher lows and higher highs, which is bullish price action. Shares of CFX recently pulled back towards its 50-day moving average of $30.29 a share, and buyers have started to step back into the stock.

If you’re bullish CFX, I would look to be a buyer of this stock anywhere near its 50-day moving average since it looks like the stock wants to continue on its uptrend. I would simply use a mental stop just below the 50-day at $30.29 in case for some reason the uptrend ends in the near future. If you get long and the 50-day holds, I would look to add once CFX takes out its 52-week high of $34.12 with volume.

To see more stocks with notable insider buying, includingVistaPrint (VPRT), Endeavour International (END) and E Trade Financial (ETFC), check out the Stocks With Big Insider Buying portfolio on Stockpickr.

-- Written by Roberto Pedone in Winderemere, Fla.

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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to Beconequity.com and maintains the website Maddmoney.net, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.